Planning to Minimize Estate Tax

The good news is that you can reduce, or eliminate, liability for estate taxes with advance planning. A couple with combined assets of $2,000,000 can eliminate liability for Massachusetts estate taxes in 2014 or in future years. There are no plans to increase the Massachusetts estate tax exemption. Each spouse can create a separate taxable estate by establishing a Revocable or Irrevocable Trust and funding the Trust with one-half of the couple's combined assets. This will allow each spouse to make use of the Massachusetts estate tax exemption of $1,000,000.

Without two Trusts, all of the couple's combined assets ($2,000,000) will be included in the taxable estate of the surviving spouse. Under laws currently in effect, the couple's children will have to pay Massachusetts $99,600 for estate taxes.

If the couple establishes and funds two Revocable or Irrevocable Trusts with assets of equal value, they can eliminate liability for Massachusetts estate taxes. Each spouse will have a taxable estate of $1,000,000, the amount that is exempt from Massachusetts estate taxes. Establishing and funding two Revocable or Irrevocable Trusts is a relatively simple technique that can reduce or eliminate liability for estate taxes.

There are ways to minimize or even reduce estate taxes. But it takes planning, so contact our experienced estate planning attorney today. From our office in North Reading, we represent clients throughout the region in Middlesex County, Wilmington, Lynnfield and Wakefield.

A single or married person can reduce Massachusetts estate taxes by making yearly tax-exempt gifts, which are currently $14,000 per person, and making additional lifetime gifts of up to $5,340,000 without incurring liability for federal gift taxes. This is a good strategy for a Massachusetts resident, because Massachusetts does not have a gift tax. Following is an example:

Example: Sarah, who is a widow living in Massachusetts, has an estate worth $1,500,000. She is 72 years old and has four children and eight grandchildren. Her income is sufficient to pay all of her living expenses. If she does no planning, her estate will owe $60,000 in Massachusetts estate taxes after her death. If Sarah starts a yearly gifting program, giving $14,000 to each of her four children and eight grandchildren, she will be able to shift $168,000 each year from her estate to her children and grandchildren ($14,000 x 12). She has been reassured by her children and grandchildren that they will not spend the money that she is gifting to them. They will establish a Trust that will hold the money gifted to them until Sarah passes away. When she dies, each child and grandchild will receive his or her share of the Trust funds, plus the accumulated interest income. With the Trust in place, Sarah proceeds with her gifting program. She does not have to file a federal gift tax return to report the gifts because they do not exceed $14,000 per person. Massachusetts does not have a gift tax, so there is no reporting requirement for Massachusetts. If Sarah makes these gifts for the next nine years, she will have shifted all of her estate to her children and grandchildren. No estate or gift taxes will be due from her or her estate.

Interested in Minimizing Your Estate Tax? Contact Roberta A. Schreiber, P.C.

For additional information about how you could minimize your estate tax, contact our North Reading office today to schedule a consultation with Attorney Schreiber.

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Roberta A. Schreiber, P.C.
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North Reading, MA 01864-2153

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